Telecommunication access business model options in Maluku and Papua, the less-favored business regions in Indonesia
| Date | 10 June 2019 |
| DOI | https://doi.org/10.1108/DPRG-10-2018-0061 |
| Published date | 10 June 2019 |
| Pages | 384-401 |
| Author | Lydia Oktarini,Hirotaka Kawano |
| Subject Matter | Information & knowledge management,Information management & governance,Information policy |
Telecommunication access business
model options in Maluku and Papua,
the less-favored business regions
in Indonesia
Lydia Oktarini and Hirotaka Kawano
Abstract
Purpose –This paper aims to provide feasiblebusiness model options that benefit all stakeholders;the
government, the investorand especially the inhabitants in Maluku and Papua, the less-favoredbusiness
regionsin Indonesia.
Design/methodology/approach –Three feasible business model options result from ICT for
development literature, current role of the government, other models and investment scheme review,
statisticalanalysis, technology analysis and investmentsimulations.
Findings –This paper proposes three different feasible business model options. The infrastructure
subsidy model, which combines20 per cent private investment and 80 per cent government subsidy, is
the most feasible businessmodel based on investment simulations. This model which combines20 per
cent private investment and 80 per cent government subsidy provides stronger determination of
IndonesianGovernment for serving rural and remotepeople. The revenue subsidy and the mixedproject
subsidy are alternative models that may provide more attractive schemes from the standpoint of
investors.
Research limitations/implications –However, currentpaper has limitation which is subject to enhance
for better analysis in future research such as implementation of the in-depth assessment of risk
managementsystem to deal with all exposed risks.
Practical implications –This paper provides that setting up a complete telecommunication access
infrastructuresin eastern Indonesia is feasibleunder new proposed models.
Social implications –The new proposed models provide stronger determination of Indonesian
Governmentfor serving rural and remote peopleand minimizing the digital dividein eastern area.
Originality/value –Under the new proposed models, the role and capacity of the government is
adjusted. The government should dominate and be less dependent on private investment. Also, the
government should shift from triggering service penetration into developing a complete infrastructure
set up.
Keywords Rural development, Digital divide, Telecommunications industry,
Telecommunications investment, Subsidy model, Access business
Paper type Research paper
1. Introduction
Infrastructures have been developed throughout the country to support telecommunications
services, particularly internet to subscribers. However, disparity has arisen, as such
development has mostly taken place in western Indonesia –the islands of Java and
Sumatera, which make up 78 per cent of the country’s population. Meanwhile, in Maluku
and Papua, telecommunications infrastructures[1] remain underdeveloped. Despite being
the second largest islands in Indonesia, Maluku and Papua are inhabited sparsely by
Lydia Oktarini is based at
the Telkom Regional 3 Jawa
Barat, PT Telekomunikasi
indoensia Tbk, Bandung,
Indonesia.
Hirotaka Kawano is based
at Graduate School of
Management, Kyoto
University, Kyoto, Japan.
Received 28 October 2018
Revised 2 February 2019
Accepted 6 March 2019
PAGE 384 jDIGITAL POLICY, REGULATION AND GOVERNANCE jVOL. 21 NO. 4 2019, pp. 384-401, ©Emerald Publishing Limited, ISSN 2398-5038 DOI 10.1108/DPRG-10-2018-0061
around 6.5 million people or only 3 per cent of the total Indonesian population [Statistics
Indonesia (Badan Pusat Statistik-BPS), 2014]. There are two problems here. First, building
infrastructure on these large islands with geographical difficulties will be very costly.
Second, a small population will also generate low revenues. Accordingly,doing business in
these types of regions is considered as less favorable for most investors as compared to
doing business in Java and Sumatera (Figure 1).
Up until 2013, the existing infrastructures connected Java, Sumatera, Kalimantan and
Sulawesi, while infrastructures in Maluku and Papua were still underdevelopment.
Moreover, backbone infrastructures in western Indonesia have also been constructed with
ring protection through terrestrial or sea cable systems to avoid serviceoutages. In terms of
internet gateways, domestic connection to global internet also starts from the western
regions of Batam (Sumatera Island) and Jakarta (Java Island), while a global connection
originating from central region of Manado (Sulawesi Island) is underdevelopment.
Meanwhile, Kalimantan Island is positioned as a redundant path of broadband traffic to
Batam and Jakarta. It is obvious that each island plays an important function in Indonesia’s
broadband infrastructureroadmap, with the exception of Maluku and Papua.
In contrast to the situation in western Indonesia, the broadband infrastructures in Nusa
Tenggara, Maluku and Papua had not been properly established up until 2013. Broadband
services in those regions mostly depend on satellite infrastructures with limited capacity
and less redundancy. Moreover, operators accordingly charge higher rates for broadband
services to subscribers in those areas because of the higher cost of providing satellite
connections. As a consequence of the high rates, low speed and poorer performance, the
broadband penetration rate in eastern Indonesia is low, particularly in rural areas. This
condition represents thedigital divide in telecommunications in Indonesia.
However, the development of telecommunication facilities under the current business model
depends on telecommunication operators whether and where they are willing to expand
their network, in which Maluku and Papua are less favored. Depending on private
investment, less role and involvement from the Indonesian Government are the reasons of
slow development on telecommunications infrastructures in Maluku and Papua. The
Indonesian Government tends to increase service penetration through some temporarily
triggering projects such as PLIK,rather than to set up complete infrastructures. PLIK stands
for Pusat Layanan Internet Kecamatan (in English: the Sub-districts Internet Center).
Introduced in 2010, these programs were designed to serve inhabitants that have
difficulties accessing internet services. PLIK uses digital subscriber line (DSL) cables from
Figure 1 Map of Indonesia
VOL. 21 NO. 4 2019 jDIGITAL POLICY, REGULATION AND GOVERNANCE jPAGE 385
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